Re: Risk and reward
Posted by AFI on May 07, 2001 at 16:17:28:
In Reply to: Re: Moral question of gaining from someone's hard luck...and other newbie questions... posted by Laura on May 07, 2001 at 15:01:56:
Without a full rundown on your income, expenses and tolerance for risk, that's a tough question to answer. You state you have $400K in equity, but is that a $400k house owned free and clear or a $1.5MM property with a big first loan?Quite a difference between the two.If you can afford to pay the credit line and only plan on doing one property at a time, I'd think you are relatively safe. Assuming yu buy properties with cash. If you use $60-70k for acquisition, $10-20k for rehab and can sell at a decent profit within 6 months, the risk will be fairly small because after you sell, your funds will be returned with profit. If you made a miscalculation, the actual cash loss wouldn't be the whole $200K. On the positive side, if you did three properties successfully, you'd be working on earned money, any possible loss is offset by the profits you've made.If you can turn properties over in 4 months, in effect, you can do 3 properties a year without exceeding $100k invested. But, if your first is successful and you have it in escrow, why not use the other $100k and buy another? You'll speed the process.My biggest suggestion would be to get very good at researching and understanding title issues. Title and lien issues are the greatest pitfall.
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